Write-down would 'put fear of God into banks'

A BANK’S decision to write off €152,000 of mortgage debt owed by Dublin nurse Laura White will pave the way for widespread mortgage debt forgiveness, it has been claimed.

Ms White agreed a deal with Bank of Ireland on Monday to repay €18,000 of €170,000 owed on a Dublin property in a settlement similar to the new out-of-court personal insolvency arrangements proposed by the Government whereby banks agree to write down debts to a level a debtor can repay over six years.

When details of Ms White’s settlement emerged, the bank stressed it did not have a policy of debt forgiveness and said deals with distressed borrowers were done on a case-by-case basis. A spokeswoman for the bank said: “The outcome of this case is not as a result of forbearance applied by the bank but instead reflects the conclusion of an exhaustive debt recovery, repossession and court process.”

David Hall of New Beginning, a group which helps people in mortgage arrears, castigated the case-by-case approach and the decision to pursue Ms White through the courts despite the fact she had surrendered her home and had no assets. “This was a mainstream bank which is part-owned by the State, so what were they doing dragging her through the courts?

“Why spend more money pursuing people in the courts on a case-by-case basis when deals could be struck much more efficiently using other methods. The legal fees alone in this case could end up costing more than the write-down,” he said. He said the case would lead to a greater degree of mortgage debt write-downs, a point echoed by leading financial adviser and director of
moneycoach.ieFrank Conway.

Mr Conway said the settlement showed there was “a creeping sense of realism on the part of the banks that decisions need to be made in extreme cases like this”. The news “would put the fear of God into banks”, he said. “ The Pandora’s box is open and we will see a trend developing.”